Benefits in kind (BIK) – some upcoming and proposed changes

Abolition of the £8,500 threshold

For directors (earning any amount) and employees earning above £8,500, the benefits/expenses received are reported on the form P11D (unless exempt, covered by dispensation or a PSA is in place). For employees earning less than £8,500, a form called a P9D needs to be completed instead. [HMRC guidance]

From 6 April 2016, the £8,500 threshold will be removed, and the employer will be liable to class 1A NIC on all BIK provided to employees, regardless of their earnings. (There are certain specific mitigations in place for lower paid ministers of religion and home care workers.)

Simplifying the administration of employee benefits and expenses

When an employer reimburses expenses which are wholly, exclusively and necessarily incurred for employment duties only, the benefit/expense is reported on form P11D and the employee has to take a deduction on their tax return or write to HMRC (unless there is a dispensation in place).

An exemption will be introduced from 6 April 2016 to exempt employees of these benefits which they would normally be allowed as a deduction.

Trivial Benefits

Most benefits provided to employees are normally reported on form P11D (unless they are exempt, or a dispensation is in place etc.) regardless of the monetary value. By concession, it was possible agree with HMRC to exclude the reporting of such benefits if they were trivial. There is no definition of trivial and this was an unofficial HMRC concession.

Legislation will be introduced in Finance Bill 2015 to provide a statutory definition of a trivial benefit-in-kind. This is expected to be introduced from April 2015.

For the purposes of the exemption, a trivial benefit is a benefit that is provided to an employee, or a member of the employee’s family or household, that meets each of the following conditions:
(1) the benefit is not cash or a cash voucher
(2) the cost of providing each benefit does not exceed £50
(3) the benefit is not provided under a salary sacrifice arrangement or any contractual obligation
(4) the benefit is not provided in recognition of services performed, or to be performed, by the employee as part of their employment.

Reporting benefits in kind

Instead of preparing a form P11D, from 6 April 2016, employers can just report the benefit through the payroll which removes the need to prepare form P11D.

If you have any queries regarding the above or wish to discuss any of these points further, please contact your Barnes Roffe partner.

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